In a Europe preparing for war, entering the market means entering the battlefield where the great battle will take place.

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Sovereignty built by subtraction

On October 19, 2026, at the Berlaymont Building, Secretary of State for Foreign Affairs Luca Beccari and Commission Vice-President Maroš Šefčovič signed the agreement establishing an association between the European Union and its member states, on the one hand, and the Republic of San Marino and the Principality of Andorra, on the other. On Mount Titano, the ceremony was watched live at the Kursaal, and the tone of the day was one of celebration: 11 years of negotiations, 4 governments, a “historic turning point” hailed by the majority parties, the Emilia-Romagna Region, and the Italian Ministry of Foreign Affairs. Almost no one asked the question that such a transition inevitably raises for a republic that has built its survival on seventeen centuries of exceptional status: what does San Marino cease to be the moment it enters the single market?

The argument put forward in these pages is that the agreement, whatever commercial advantages it may bring, brings an era to a close. San Marino’s uniqueness – political, legal, and strategic – was not a folkloric relic. It was a source of power, the only one available to a state of sixty-one square kilometers. Exchanging it for market access means transforming San Marino from a space sheltered from conflict into a periphery of a bloc that wages those very conflicts: on the economic front today, and with increasing likelihood on the military front tomorrow.

San Marino’s longevity can be explained by a simple rule: never become part of what could destroy it. In 1797, the Republic declined Napoleon’s offer of territorial expansion, aware that a larger territory would merely be a larger target. In 1849, it granted refuge to Garibaldi without being drawn into the Risorgimento, and in 1862, it regulated its relations with the new Kingdom of Italy through a friendship treaty rather than annexation. In the 20th century, its neutrality held firm – at great cost – even when, in June 1944, Allied bombers struck a territory teeming with displaced persons.

This policy of withdrawal has produced a form of state that classical geopolitics struggles to classify. San Marino has no strategic depth, no resources, and no armed forces in the strict sense; yet it does have a position – that of an entity that no one has an interest in involving because it belongs to no camp. Its sovereignty is measured not by capability but by distance. It is a sovereignty by statute, which holds as long as the rules of Mount Titano remain Mount Titano’s own, as long as its foreign policy choices are not dictated elsewhere, and as long as its law does not become a reflection of an external legal system.

Until recently, even relations with Brussels adhered to this framework. The customs union and the monetary convention were sector-specific instruments: they regulated goods and currency while leaving the political architecture of the state intact. The agreement on cooperation and a customs union with the European Economic Community dates back to 1991 and entered into force in 2002; the Monetary Agreement with the European Union dates from 2012 and makes the use of the euro contingent upon the transposition of the banking acquis. When, in 2013, the people of San Marino were called upon to vote on the application for EU membership, the referendum did not even reach the quorum. The agreement signed in Brussels circumvents that limit: it does not bring San Marino into the EU, but brings the EU into San Marino.

The document marking the end of the privilege

When read in its entirety, the text refutes the notion that this is merely a trade agreement. The framework agreement consists of 112 articles, plus 7 protocols, a country-specific protocol with 6 appendices, and 25 annexes that list, act by act, the European law that the Republic will be required to apply. It is also a mixed agreement: in addition to the Great and General Council, it requires the consent of the European Parliament and ratification by the 27 national parliaments, while the San Marinese government aims for provisional application as early as the beginning of 2027. Three elements define the Republic’s new status.

The first is dynamic alignment. The annexes capture the acquis as it stood at the beginning of 2023; anything Brussels has produced since then – from crypto-assets to artificial intelligence to the new anti-money laundering package – will be incorporated through the Joint Committee, which is required to decide within six months of a proposal, failing which a dispute resolution procedure will be initiated. San Marino will sit on the councils of European authorities without voting rights and will be consulted by the Commission on the same basis as Member States. In the literature on differentiated integration, this condition has a specific name: “rule taker.” The associated state receives rules it did not draft, within timeframes it does not control, on matters that expand every time the Union broadens its own competences.

The second aspect is the transfer of decision-making authority. With regard to state aid, San Marino’s new regimes cannot take effect before the Commission’s decision – and the Commission may directly refer the matter to the Court of Justice – and the entire inventory of existing incentives must be brought into line with European criteria within two years. In the financial sector, European supervisory authorities will be granted direct powers, including the authority to request the suspension of an intermediary’s license – with decisions enforceable without San Marino’s approval – and market access will be subject to a binding bilateral agreement with Italy on supervision. The two levers with which San Marino has negotiated its autonomy for decades – favorable tax treatment and its financial center – are thus brought under control residing in Brussels, Frankfurt, and Rome.

The third element, the most political one, is Article 103, which obligates San Marino to prevent the rights arising from the agreement from being used to circumvent the Union’s restrictive measures. On paper, it is an anti-circumvention clause. In essence, it is the gateway through which European foreign policy – which San Marino has never endorsed – enters its legal system via the market. To put it simply, this marks the end of San Marino itself, not just the end of its privileges.

From active neutrality to the sanctions framework

To gauge the scope of Article 103, we must go back to March 2022. With Decree-Law No. 27 of March 4, the Republic adopted restrictive measures for the first time that differed from those decided by the United Nations, implementing the European sanctions regime against the Russian Federation. After the Crimea crisis in 2014, San Marino had chosen not to follow Brussels’ lead and, over the following decade, maintained close economic and diplomatic ties with Moscow, even resorting to the Sputnik V vaccine in 2021 while doses expected via Italy were slow to arrive. The 2022 shift was presented as “active neutrality,” but in the chamber, some acknowledged that part of that neutrality had been lost by adhering to the sanctions. Moscow, for its part, added San Marino to its list of hostile countries.

However, the 2022 decision was a sovereign and revocable choice, made through acts of the Great and General Council. The Association Agreement transforms it into an international obligation, and the EU’s sanctions regime effectively extends to San Marino. Furthermore, that regime no longer concerns Russia alone. European restrictive regimes cover Iran, Belarus, North Korea, human rights violations, and cyberattacks, and the Commission has equipped itself with anti-coercion tools designed for trade disputes with major powers, including China. Every new regime decided in Brussels – by states among which San Marino has no vote – will become a constraint on San Marinese banks, businesses, and professionals.

This is where the loss of uniqueness becomes vulnerability. A small state uninvolved in economic conflicts is not a target for retaliation; a small state integrated into the market of a bloc that imposes sanctions becomes one. Countermeasures by Moscow, Beijing, or Tehran do not distinguish between members and associates; they target the jurisdiction that enforces the measures. The same applies to transatlantic trade wars: with the new customs union – where customs clearance takes place at Italian offices and duties are collected on behalf of the Republic – San Marino’s tariff policy remains aligned with that of the European Union. The Titano is relinquishing the neutrality that once made it a partner to all.

The union arms itself

The most sensitive aspect remains the military one. The agreement contains no defense clauses or mutual assistance commitments, and it would be incorrect to attribute such provisions to it. The problem lies elsewhere. Through dynamic alignment, San Marino is linking itself to a legal framework that is changing in nature. Since 2022, the Union has progressively transformed the internal market into a security instrument: programs supporting the defense industry, joint loans for arms purchases, control of foreign investments, dual-use goods regimes, and rearmament plans presented as a condition for European competitiveness. It is likely that the single market of the coming decade will resemble a low-intensity war economy, and that the law called upon to regulate it will bear the marks of this reality.

An associated state that transposes that acquis does not thereby become a belligerent, but it ceases to be an outsider. Its companies can enter European defense supply chains, its intermediaries can join rearmament financing networks, and its territory can be incorporated into export control systems. In a hybrid conflict, where financial and IT infrastructure are considered legitimate targets, the distinction between member states and associated states narrows until it disappears. Over the next ten years, it is likely that external actors will treat San Marino as part of the European framework, without the Republic having access to the protections or voting rights reserved for member states.

Andorra and San Marino assume the obligations of membership without the powers that come with it: they remain outside the Council, the Parliament, and the Commission, but within the scope of the decisions those institutions make. It is no coincidence that the Principality of Monaco, which was negotiating within the same framework, suspended talks as early as 2023, and in Andorra, a labor union withdrew from the national pact on Europe, objecting to the lack of a referendum.

What remains to be decided

If we wish to maintain a positive outlook, the signing does not mean the matter is settled. The agreement must still be ratified by the Great and General Council. The key indicators to watch are concrete: the timing and procedures for ratification, any request for a referendum, the content of the bilateral agreement with Italy on financial supervision, and, above all, the first implementation – through a joint committee – of a sanctions regime adopted after the signing. That step will reveal how much of its autonomy of judgment the Republic has retained, even though rumors suggest there is boisterous enthusiasm within the halls of the small city-state.

San Marino has weathered the Roman Empire, the Papal States, Napoleon, the Risorgimento, and two world wars while remaining true to itself – and it has done so by refusing, time and again, to become part of something larger. On October 19, it made the opposite choice. Opportunities for businesses exist. The price – which the press releases deliberately omit – is the surrender of the exceptional status that for seventeen centuries has been its sole defense.

In a Europe preparing for war, entering the market means entering the battlefield where the great battle will take place.

The European Union has signed a comprehensive association agreement with Andorra and San Marino, establishing a framework that will allow the two small European states to participate more fully in the EU single market while remaining outside the bloc.

The agreement was signed in Brussels on Monday, 19 October, by representatives of the European Commission and the two governments, marking the conclusion of negotiations that began more than a decade ago.

The arrangement covers trade, investment and regulatory cooperation, alongside provisions concerning financial services, education, environmental protection, consumer rights and other areas normally governed by EU legislation.

However, the agreement has not yet entered into force. It requires further approval procedures, including consent from the European Parliament and ratification by the participating countries. Andorra intends to submit the agreement to a binding national referendum.

Access to the European single market

According to the European Commission’s announcement, the agreement will provide Andorra and San Marino with access to the single market under shared regulatory requirements and conditions intended to ensure fair competition.

The principal objective is to remove barriers that continue to restrict economic activity between the two countries and the EU’s 27 member states.

For businesses, the arrangements should provide greater predictability concerning the rules governing cross-border trade, investment and commercial operations.

Participation will nevertheless require both countries to implement relevant EU legislation and maintain systems capable of enforcing the applicable standards.

In practice, access to the European market will carry obligations comparable to those imposed on companies established inside the Union, particularly concerning product standards, competition, environmental rules and consumer protection.

The agreement also establishes institutional arrangements for managing cooperation and dealing with future regulatory developments.

For two countries whose economies are closely connected to neighbouring EU members, greater regulatory consistency could reduce administrative barriers and facilitate commercial expansion.

Financial services to be integrated gradually

Financial services represent one of the more sensitive elements of the agreement.

Andorra has a banking and financial sector with substantial links to Spain and France, while San Marino’s economy is closely integrated with Italy.

Both countries already use the euro under separate monetary arrangements with the European Union, although neither is a member of the eurozone or the EU.

The new association framework would provide a route towards broader participation in the EU financial services market, but integration will be gradual and subject to specific conditions.

The Commission has made clear that the process will involve assessments of the regulatory and supervisory arrangements operating in both countries.

This means the signature does not provide their financial institutions with immediate, unrestricted access to all services available within the EU.

Brussels has also signed updated monetary agreements designed to remove overlapping requirements between existing arrangements and the new association framework.

Financial supervision, the prevention of money laundering and compliance with European regulatory standards will be central to the implementation process.

Integration without EU membership

The agreement illustrates how the Union can extend significant elements of its economic framework to neighbouring countries without admitting them as members.

Andorra and San Marino will not acquire voting rights in EU institutions or the political representation enjoyed by member states.

Their participation will instead depend on accepting relevant common rules and complying with the institutional provisions established under the association agreement.

The EU already operates differentiated arrangements with several non-member European countries, including Norway, Iceland and Liechtenstein through the European Economic Area.

Earlier European Council conclusions on relations with non-EU Western European countries identified Andorra and San Marino among the states with which Brussels sought closer economic and institutional cooperation.

The newly signed agreement does not replicate every aspect of existing arrangements, but it follows the broader principle that access to the single market can be negotiated separately from EU membership.

That principle is also relevant to discussions about how candidate countries might receive selected economic benefits before completing the full accession process.

Brussels has been considering wider market participation for countries such as Ukraine and Moldova ahead of possible membership.

Referendum and ratification ahead

The immediate political challenge now moves from negotiation to approval.

Following the signature, the Council will seek the European Parliament’s consent before the agreement can be formally concluded. Its application will also depend on the completion of the necessary national procedures.

In Andorra, Prime Minister Xavier Espot’s government has committed to a binding referendum, although no voting date has yet been fixed.

The referendum will determine whether Andorran voters accept the economic opportunities and regulatory commitments established by the agreement.

San Marino must also complete the procedures required under its constitutional system.

Until those requirements have been satisfied, the agreement remains a signed framework rather than an operational extension of the EU single market.

For both countries, the eventual implementation will determine how far their economies can integrate with the Union while retaining their existing status as independent non-member states.